So, You Think You’ll Receive a Pension. Ho, Ho. Ho.

13 Jun

By Dr. Gary North •

And, I might add, ha, ha, ha.

All over the world, trusting employees have agreed to
accept a pension rather than higher after-tax wages. This
is a sucker’s play.

If you are willing to click every link in this report
and read what it leads to, you will find out if you are one
of these suckers. If not, you will have to take my word
for it.

All over the West, tens of millions of people will end
their lives in a bedroom in the homes of deeply resentful
children, or else living in their own homes as renters: a
reverse mortgage. The children will be equally resentful.
“That’s our inheritance!” The ungrateful vultures will not
pay for their parents’ old age, but they want the money
after the funeral.

Sorry, Charlie. The tax man got it. You voted for
the politicians who made sure the tax man got it. So did
your parents. So did their parents. The politicians
announced: “You can trust us!” Indeed, you can. You
shouldn’t, but you can. Most voters did.

Let me ruin your day. Click the following link. It
goes to 140,000 articles on “pension crisis.” Isn’t Google
grand? So little time, so many articles.

Also, so little time until your retirement, so little
capital in your retirement fund. There is not a dime in
Social Security’s Trust Fund. It has government IOU’s
instead. They don’t call it a trust fund for nothing.
“Let them eat trust.”

The government took your FICA “contribution” and spent
it. The Ponzi scheme just keeps getting worse.

All Ponzi schemes eventually go bust when there are no
more suckers coming in whose money will pay off the early

You are a late bird.

The clock is ticking.


The Pension Benefit Guaranty Corporation (PBGC)
insures the private pensions of approximately 44 million
American employees. According to its February 2008 press

The PBGC is a federal corporation created under
the Employee Retirement Income Security Act of
1974. It currently guarantees payment of basic
pension benefits for about 44 million American
workers and retirees participating in over 30,000
private-sector defined benefit pension plans.

The public thinks this is a government-guaranteed
program. It isn’t. As the press release says,

The PBGC is not funded by tax dollars, and does
not enjoy the full faith and credit of the United
States government. The agency is financed by
premiums paid by employers, assets from failed
pension plans, recoveries from bankruptcies and
returns on invested assets.

According to this press release, the funds in the
insurance pool are insufficient to guarantee its retirement
insurance program. So, the organization is going to put
more money in the stock market. This is another case of
the horse having fled the barn. The PBGC missed the stock
market boom, 1982-2000, and has watched the Standard &
Poor’s 500 index decline since 2000. It now wants more
stocks in its portfolio. Why? Because it needs a high
rate of return to grow its way out of its own shortfall.
Here is how the agency explains its shift in policy.

The PBGC currently has approximately $55 billion
to invest in the new investment policy. Under
this new policy, the PBGC will allocate 45
percent of its assets to a diversified set of
fixed-income investments, 45 percent to
diversified equity investments and 10 percent to
alternative investment classes. The agency’s
previous policy set an equity investment target
of 15-25 percent, although the actual level of
equity investments was 28 percent at the end of
FY 2007.

The PBGC had an accumulated deficit of $14
billion as of year-end FY 2007.

It has $82 billion in liabilities and $68 billion in

Its board assumes that there will be no major crisis
in the American economy that will lead to a high rate of
pension bankruptcies. It will be business as usual.

The economy is facing long-term competition from Asia,
a falling dollar internationally, a crisis in the banking
system, and is running a $700 billion to $800 billion
negative balance of payments, i.e., it needs this much
money coming into the country every year from foreign
central banks and investors. Real estate prices are
falling. Foreclosure rates are rising. There has not been
a major recession since 1992. The banking system is
unprepared for a true real estate crash. It has not has
one since 1933.

In February, the Bank of American sent a report to
members of Congress warning of a fall in equity of $739
billion due to the housing crisis. The BoA suggested the
creation of a Federal Homeowner Preservation Corporation
which will provide in injection of taxpayers’ funds to
enable homeowners to keep masking payments to the banks.

This is merely the latest & greatest proposal for debt
relief. Debt relief is always in the name of the people,
in the name of fairness, in the name of charity. And it
always involves the same scenario: making sure the banks
get paid.

Business will not be as usual.


I assume you have a plan. If you don’t have a plan,
here are my guidelines: ten questions you had better get

The basics of your plan must consider three
fundamental factors:

1. Your life expectancy
2. Your pension fund’s life expectancy
3. The dollar’s life expectancy

Until you have a clear idea about all three, you are
flying blind. These are the three factors that your plan
must deal with.

People don’t like to plan too far ahead. They are
besieged by the tyranny of the urgent. They assume that
the future will take care of itself. It won’t. So, people
wind up adjusting to the latest urgent crisis. They don’t
shape their futures. Events bang them around.

There is no way to plan everything. I like Gamble
Rogers’ line: “Life is what happens to you while you’re
making other plans.” (John Lennon liked it, too — a man
whose life came up against an unforeseeable event for which
his current plans had no answer.) But it’s better to have
a plan for events to bang up against than no plan.

You may have a plan. Does your spouse concur? Do
your children understand it? Do you have reasons for not
revealing it to them? Does it include them? At what

If you die and your spouse remarries, are your
children protected from the decisions of the new spouse?
How, exactly?


Most plans fail. Such is life. If your retirement
plan fails, what is your fall-back plan?

If you have your health, and if your mind is still
sharp, you have the basics of a fall-back plan. You will
be able to adjust. But if bad health or a stroke
intervene, then you will be vulnerable to a mistake in your
primary plan.

If you had to cut your spending by 50% in one month,
could you do this? You had better be able to, because that
is what retirement will do to your income.

Have you ever say down with a sheet of paper or a copy
of Quicken and gone through this exercise? You are 66 or
67 years old. Social Security is coming in. (You can take
reduced benefits at age 62, but I waited.) Your pension is
coming in, if you had one. Your home is paid off. Make a

This exercise is painful because it shows the best
that you can expect. The reality will be worse the younger
you are today. The dollar will go under if your pension
and Social Security don’t. Why am I sure? Because of what
the Medicare deficit will do to the Federal deficit. For a
brief survey, go here:

My fall-back from the beginning was my retirement
plan. My primary plan was not to retire. So far, so good.

We read stories of retired Americans who are going
back to work. I am not sure these are representative of
most retirees. I think most retired people are not
planning to go back to work. They are not qualified to do
much that would earn them anything above the minimum wage.
They would have to be work side by side with teenagers. I
don’t see these people in Wendy’s or Subway. The sense of
defeat is too great. Also, leisure is habit-forming.

It is the step down that bothers people. They were
used to getting promoted. Then, overnight, they are
demoted. I think of Jack Nicholson’s character in “About
Schmidt.” The thought of winding up like Schmidt is
frightening to me. The thought of admitting publicly that
you have wound up like Schmidt is almost equally

For those who do not want to start a side business, I
recommend getting involved with a privately funded charity
of some kind. If you can apply what you know today in a
new setting, you may be able to work your way into a paid


Procrastination is not the same as planning.

If you are really concerned about these issues, you
had better sit down and either revise your existing
retirement plan or else start one. This issue will not
take care of itself. Worse, Congress will take care of it.

I realize that the following exercise may sound silly,
but it isn’t. Substitute the word “Congress” for “Lord.”

Remember, O LORD, thy tender mercies and thy
lovingkindnesses; for they have been ever of old
(Psalm 25:6).

Withhold not thou thy tender mercies from me, O
LORD: let thy lovingkindness and thy truth
continually preserve me (Psalm 40:11)

Hear me, O LORD; for thy lovingkindness is good:
turn unto me according to the multitude of thy
tender mercies (Psalm 69:16).

Let thy tender mercies come unto me, that I may
live: for thy law is my delight (Psalm 119:77).

The LORD is good to all: and his tender mercies
are over all his works (Psalm 145:9).

I hope this gets my point across. To fail to plan is
to plan to fail.

Gary North’s Economic Edge™

The Economic Edge, a publication of The American Vision, is emailed twice per week every Wednesday and [Saturday or Monday]. There’s no charge for a subscription to this publication. Forward to your friends by clicking the link below and invite them to sign up for a FREE subscription!


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